YOUR MONEY: Get well paid soon
Don't let a sudden serious illness rob you of your financial strength. Andrew Geldard surveys the sizable, tax-free cover on offer
Wednesday 19 March 1997
But how soon they can resume work is another matter - a serious illness may mean a considerable if not permanent period of incapacitation. People are 14 times more likely to be off work because of long-term illness than die prematurely.
Combine this situation with the knowledge that the employer has statutory rights to provide sick pay for only a limited time, together with the fact that benefit provided by the state is likely to amount to a fraction of what you were earning and you have the recipe for financial difficulties.
That is a situation which critical illness (CI) cover is designed to alleviate. It will pay a sizeable, tax-free lump sum on diagnoses of a specific life-threatening medical condition or if the policy-holder becomes disabled and unable to work again.
Unlike life assurance, which supports relatives after the policy-holder's death, CI cover helps the policy-holder. The cash sum provides comfort and reassurance during an uncertain time by enabling the policy-holder to honour financial commitments like the mortgage, pay for specialist medical treatment and equipment while supporting day-to-day needs.
Since its launch in 1986, CI cover has become more predominant and there are now more than 60 companies providing policies which cover, in some cases, more than 30 serious illnesses. Total number of policies are now near the one million mark - still only 2 per cent of the population.
The recent growth area of CI cover has been largely through policies sold as part of a mortgage package. According to Peter Robertson, assistant general manger of Standard Life, a mortgage represents a clear need for protection.
"One problem CI has as a stand-alone product is that many people adopt the attitude 'it won't happen to me' and cannot justify the premium going out of the bank account each month,' says Robertson. "When CI comes as part of a mortgage, they don't mind another small amount being added to the payment as they recognise its role in protecting their most important financial asset against unforeseen illness."
Other significant companies on the market include Legal & General, Swiss Life, Scottish Provident, and Norwich Union. All provide policies which give average cover of pounds 50,000-pounds 60,000 on diagnoses of such conditions as multiple sclerosis, kidney failure, heart disease and even CJD.
Current Legal & General premiums are among the best in the market. A 30-year-old man wanting pounds 50,000 comprehensive C1 cover for 25 years will pay a guaranteed premium of pounds 14.05 per month. Scottish Provident's rate is slightly higher at pounds 19.09.
While most critical illness policies cover more than 30 conditions, the vast majority of claims are usually for heart attacks, cancer or strokes. As a result, policies exist which provide CI protection for just these three major illnesses, such as Abbey Life's Living Assurance Select.
Bryan Fisher of IFA firm Berkeley Financial Planning says: "It's very much a case of choosing whether you want to have third party cover or pay that bit extra to be fully insured against most range of illnesses. Having a policy which only covers the main three illnesses is fine until another one strikes, which is something you can never predict."
While the sale of CI cover with mortgage continues to thrive, as a stand alone product it still has some way to go before becoming as popular a part of our financial planning as pensions and PEPs. The name "critical illness" does provoke negative connotations in many consumers who take health for granted and cannot contemplate the thought that a horrible illness could strike at some stage in their life. But just as you assess the risks of an equity investment going wrong, take time to look at the risk of a sudden serious medical condition playing havoc with your quality of lifen
Scottish Provident 0131 558 2740, Legal & General 0345 125626, Berkeley Financial Planning 01203 555240, Swiss Life 0345 228866.
- 1 Howard Jacobson: Let's see the 'criticism' of Israel for what it really is
- 3 Belgium fan Axelle Despiegelaere lands L'Oreal campaign after World Cup viral photo
- 4 Britney Spears sings 'Alien' without Auto-Tune in embarrassing leaked audio clip
- 5 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
Sustained immigration has not harmed Britons' employment, say government advisers
Australia facing international condemnation after turning around Sri Lankans at sea
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
There’s a nasty smell in the political air – and it’s coming from the Tories
iJobs Money & Business
£12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...
£400 per hour: Orgtel: Technical Business Analyst - Banking - Bristol - £400pd...
£38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...
£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...
Day In a Page
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square
A charming four-bedroom house overlooking Burleigh Square Park, close to Thorpe Bay